Book Review


The Coming First World Debt Crisis

Ann Pettifor Palgerave MacMillan 2006

Ann Pettifor became well-known for her work with Jubilee 2000, campaigning for cancellation of ’third world’ debts. In this book she looks at the problems created for the ’first world’ by our usurious debt-money system, and the near-collapses of the system around the world, starting with the Mexican ‘meltdown’ in 1982.

She recognises the disastrous effects of compound interest, and the inexorably mounting levels of debt throughout the world generated by the banks’ usurped prerogative to create money in parallel with interest-bearing debt. She rightly regards the imminent collapse of the system under this debt-burden as inevitable unless the system is changed.

She debates the historical case against usury, and supports it, but then accepts the argument for ‘reasonable’ (i.e. low) levels of ‘interest’.

While rightly critical of ‘globalisation’ and aware of the role of the international financial system in promoting it, she naively believes that ‘Our international financial system was, until relatively recently, stable, equitable and fair’.

While recognising that the controls placed on the banks following the 1929 crash and the post-war ‘Keynsian’ ‘Bretton Woods system’ provided an era of relative stability and prosperity until it was dismantled in the 1970s, she is uncritical of its failure to remove the financial ‘need for growth’ or the unfair, inequitable distribution of income.

She is throughout uncritical of the ‘benefits’ or ‘need’ for growth of GDP and international trade, or for ‘full employment’ in this age of automation.

She argues for the restoration to government of the power to create money – quoting, for example, Josiah Stamp, who was President of the (then private) Bank of England in the 1920s: "The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight-of-hand that was ever invented. Banking was conceived in inequity and born in sin … But if you want to continue to be slaves of the bankers and pay the cost of your own slavery, then let the bankers continue to create money and control credit."

However, she does not consider the effect of having a permanently circulating, adequate quantity of money initially spent into circulation, in eliminating nearly all debt, as it replaced the debt-based supply – or be clear that it should replace all bank-created money. Rather, she is concerned primarily with the effect of interest charging, arguing for this to be kept to low rates, and does not, apparently, appreciate that if all money were to be spent into circulation by a public body as a permanently circulating medium of exchange, there would be very little need to take on debt (once the change-over was completed and all outstanding debts at the time of change-over paid-off) and so the rate of interest charged on it would be of minor concern.

This said, she is clear that ‘Finance’ must ‘be subordinated to the interests of humanity and the earth’ and calls on ‘faith organisations’ to ‘lead this new ethical movement and… focus on matters economic, as most of the great prophets have done’.

She importantly asserts ‘the need to reclaim democracy; to restore power to democratic institutions, by transferring powers from the private finance sector back to elected, accountable governments and institutions’.

For international exchanges, she advocates Keynes’ proposed system based on an International Clearing Union.

The book is replete with copious facts and references, and is fully indexed.

Brian Leslie